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- When portfolio managers of mutual funds buy and sell stocks in the market to alter the fund portfolio, it is referred to as 'turnover'.
- While not necessarily a bad thing at the outset, turnover generates transaction fees and potential taxable events for fund investors.
- In general, lower fund turnover rates signal higher quality - but the turnover will depend on the type of fund and its stated investment strategy.
- Growth funds tend to have higher turnover rates as they invest more actively.
- On the other end of the spectrum, index funds should have very low turnover rates as they only trade when the index they're tracking changes composition.
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